Sterling continues to ride high. Economists at ING discuss GBP outlook ahead of the Bank of England (BoE) meeting.
Sterling can hold onto gains in the near term
Our strong preference has been that sterling will enjoy more upside against the dollar than the Euro. Currently, we have a 1.33 end-year forecast for GBP/USD and the near-term bias is for 1.30 given what seems to be bearish momentum building against the Dollar.
EUR/GBP has been weaker than we had expected. And the BoE meeting may be too soon to expect a bullish reversal here. Yet, consistent with our house view that the Bank Rate will not be taken as high as the 5.65% level currently priced by investors for the end of this year, we suspect that EUR/GBP ends the year closer to the 0.88 area, meaning that current EUR/GBP levels should make a good opportunity to hedge Sterling receivables for Euro-based accounts.
See – BoE Preview: Banks expect 25 bps, door open to further hikes
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